COVID-19 impact on employed dermatologists: Part 1
Legally Speaking
Robert M. Portman, JD, MPP, is a health care attorney with Powers Pyles Sutter & Verville, in Washington, DC, and serves as legal counsel for the AAD and AADA.
By Ben Tesdahl, JD, Megan La Suer, JD, MHA, and Rob Portman, JD, MPP, September 1, 2020
Every month, Dermatology World covers legal issues in “Legally Speaking.” This month’s authors are health care attorneys with Powers Pyles Sutter & Verville in Washington, D.C. Portman is also general counsel for the AAD and AADA.
This article expands upon recent Dermatology World articles that touched upon the employment-related considerations that dermatology practices were likely facing as a result of the COVID-19 pandemic (see sidebar). In the first part of this article, we take a look at the implications of employee contracts on the legal rights of employed dermatologists in the event of furloughs, salary reductions, and layoffs resulting from COVID-19. Dermatology practices that serve as employers will also find the guidance below useful as they consider the possible need to cut hours, cut pay, and/or lay off physician staff.
Background
Many dermatologists have employment contracts that specify the terms of employment and the specific circumstances under which their employment can be terminated, or their salary reduced. Whether there is an employment contract, professional employees are by the nature of their duties normally deemed to be “exempt” employees, meaning that they are exempt from federal overtime rules under the Fair Labor Standards Act (FLSA) and can be required to work more than 40 hours per week without any need to pay them more than their base salary. On the other hand, exempt employees generally must receive their full pay as long as they work any amount of time in a workweek, even if the hours of work during that week are much less than normal.
By contrast, most nurses, technicians, and support staff have no employment contract and are “at will” employees who can be terminated with or without cause as long as the termination does not violate anti-discrimination laws. Because many of these workers do not have supervisory or managerial responsibilities, they are likely to be “non-exempt” employees who are entitled to overtime pay if they work more than 40 hours in a workweek. However, unlike exempt workers, non-exempt employees need only be paid for hours actually worked each week. This article will primarily focus on employment law issues pertaining to exempt dermatologist employees.
A complicating factor is that, in addition to federal employment law under the FLSA, each state has the right to pass its own laws that may be more restrictive or more generous than federal law. Consequently, the guidance below is based on general federal law guidance only. Employees must also consult the laws of their particular state to see if there are any additional or different rules.
Q: As an employed dermatologist, what are my rights if I am told by my employer of a reduction in my salary and/or hours due to the economic impacts of COVID-19?
A: The answer depends in large part on whether there is an employment contract or whether a dermatologist has no contract and is instead an “at will” employee.
1. Dermatologists with employment contracts
The starting point for any dermatologist with an employment contract is to carefully review the terms of the agreement. If the contract allows the employer to make changes to hours, pay, or other conditions, the contract should specify the circumstances under which this can be done and whether there are minimum notice and time limits before such changes can take place. If the agreement clearly does not allow a cut in pay and an employer implements one anyway, the employee has a potential breach of contract claim against the employer.
In addition to reviewing the terms of the employment contract, federal and state employment laws must also be considered. As noted above, the FLSA states that exempt employees normally must be paid their full salary for any week in which they perform literally any work, even if the hours of work are significantly below normal or if the employee does not work for one or more days. On the other hand, such employees do not need to be paid for any week in which they perform no work at all. Consequently, one legitimate tactic that employers may use to reduce labor costs is to leave an exempt employee’s salary at its normal level, but request that the employee take a one-week furlough without pay, effectively cutting the person’s salary for that one particular month by 25%.
It is also generally permissible under federal employment law for an exempt employee’s salary to be reduced if the reduction meets three requirements: it is prospective only, any reductions in salary are “infrequent,” and the reduction is necessitated by severe economic conditions (which might include conditions arising from the consequences of COVID-19).
A key issue in this three-pronged test is the question of what is considered “infrequent,” and in that regard, there is no clear-clear cut answer and the law may also vary from state to state. Some commentators believe that a reduction in pay and hours for a brief period of time twice a year is probably permissible, and there is one federal court case finding that a one-time reduction in hours and pay that lasted for two full months was also acceptable. On the other hand, it appears that some states, including California, would not allow any plan that ties reduction in pay to reduced hours of work.
2. Dermatologists without employment contracts
If a dermatologist has no employment contract, the dermatologist is subject only to the restrictions of the federal employment laws outlined above, and assuming also no violation of anti-discrimination laws, an employer can reduce salary, reduce hours, mandate periods of furlough, and lay off such employees with or without cause and with or without prior notice. Again, state employment laws should also be consulted to see if they provide additional protections.
Q: What is the federal salary threshold required for an “exempt” employee, and is that threshold pro-rated for part-time employees?
A: As noted above, professional employees such as dermatologists would normally qualify as “exempt” employees who are not entitled to overtime pay. However, one often-overlooked requirement to be in the exempt category is that the person must be paid a salary of no less than $684 per week ($35,568 per year). While most full-time dermatologists would easily exceed that minimum threshold, the Department of Labor has ruled that the salary threshold is not pro-rated for part-time employees.
Consequently, if a part-time dermatologist without an employment contract who is normally paid $70,000 annually is asked by his or her employer to cut their salary and hours in half due to a severe economic downturn caused by COVID-19, such a reduced salary would not satisfy the foregoing salary threshold because it would be under $35,568. Even though the dermatologist lawfully could be paid only $35,000, they would no longer be exempt from overtime and can demand to be treated as non-exempt and eligible for overtime for any week in which they work more than 40 hours. The point is that workers sometimes are inadvertently moved from an exempt employment category to a non-exempt employment category due to changes in hours or salary without anyone realizing it, so dermatologists and dermatology practices should be on the look-out for situations where that may occur.
Q: If I believe I am being treated differently from other dermatologists in the practice when it comes to salary reductions, furloughs, or lay-offs, how do I determine what is legal and what is not?
A: Being treated differently than others is not, by itself, illegal, and the fact that you may subjectively view your furlough or lay-off as unfair is not necessarily relevant. However, under federal anti-discrimination laws, it is illegal for an employer to take any adverse employment action against you based on your race, religion, gender, or any other protected classifications. Proving that intentional discrimination was the reason for an adverse employment action is usually very difficult to do. However, it is possible to show that a furlough or layoff was done in a way that had an impermissible disparate impact on employees of a particular race, gender, or ethnicity. The laws surrounding employment discrimination are very complex and the outcome of any case is often very fact-specific, so your best bet is to consult with a knowledgeable employment attorney if you think you have been discriminated against based on a protected classification.
Read part 2 of this column, which covers considerations for employees when aspects of their contracts have been lawfully changed by their employers.
This article is provided for informational and educational purposes and is not intended to provide legal advice and should not be relied upon as such. Readers should consult with their personal attorneys for legal advice regarding the subject matter of this article.
